Financial Literacy Module 2

Transcription

1 QUT School of Optometry Financial Literacy Module 2 Murray Wilkinson WB Financial Personal and Business Financial Planning Presentation Title Presenter Name Robert Steinhardt Chartered Accountants & Business Improvement Professionals

2 General Advice Warning The presentation does not constitute formal advice and is presented for discussion purposes only. This presentation is for information purposes only. It, along with any discussion on this presentation, should not be construed as Personal Advice. The scenarios and examples presented are of a general nature and may bear no relevance to your circumstances and should therefore not be acted upon unless formal Advice is sought from a suitably qualified professional Adviser. To discuss how WB Financial or Steinhardt can be of assistance, please contact: Murray Wilkinson Robert Steinhardt WB Financial Steinhardt Chartered Accountants Ph: (07) Ph: (07) murray.wilkinson1@wb.com.au robert@steinhardt.com.au

3 Debt and Investments

4 Beliefs & Wealth

5 Three way struggle Lifestyle Debt

6 Debt why have it? Instant gratification Vs delayed gratification Outcome is a plethora of debt instruments

7 All debt is bad Private Investment Bad Good

8 Bad Debt Lifestyle debt Holidays Car Fashion Home Income depleting $ $ $ Bad Debt

9 Good debt Wealth Creating Debt Investment Strategy Shares Rental Property Income generating $ $ Good Debt $

10 How much do you have to earn to pay off every $1 of interest? Tax: 50% Tax: 0% (deductible) Real Cost: $2.00 Real Cost: $1.00 Pay off your highest debt first and Aim to borrow for wealth creation

11 Lending Practises Income and asset Test Loan to Value ratio Serviceability test

12 Principal and Interest Loan Interest and Principal Loan $ Interest 7 years Principal 0 Time

13 Interest Only Payments $ Time

14 Offset accounts

15 Buying a Home Who is the purchaser? What can you afford? Where can you afford? How to get Finance approval? Find the house and know what it s worth before you bid Prepare the contract in advance Negotiate hard Structure loans with cashflow and future flexibility in mind

16 Meet Teisha & Callum Their home is worth $500,000 against a mortgage of $300,000 Their plan is simple, pay off the mortgage. Structure of their current plan: $500K Salaries Sav A/C repayments Mortgage $300K

17 Wealth creation strategy: $500K $400K Salaries Sav A/C Loan -$300K Equity -$100K Assets $50K Tax Returns $1,000/mth Investment Income

18 3 Types of Investable Assets Cash or Fixed Interest Property Shares

19 Australian Asset Class Returns 19

20 110 years of investing

21 Source: Russell Investments

22 Getting into Business Find an opportunity? Do the numbers? Is it viable? What is the purchase price? Can the cashflow from the business fund it? How do I structure the ownership? How do I structure the debt?

23 Tax

24 Income Taxable (Net) Income Assessable Income - Deductions = Taxable Income Deductions (or Expenses) could include: Accountancy Fees Subscriptions Motor Vehicle Expenses Financial Planning Fees Depreciation on Home Office Accountancy Fees Professional Indemnity Premiums A portion of Home Internet A portion of Telephone Income Protection Premiums Printing and Stationery Accountancy Fees

25 Income Taxable (Net) Income FOR A BUSINESS: Sales less Expenses = Net Profit Accountancy Fees Subscriptions Motor Vehicle Expenses Financial Planning Fees Rent and Outlays Bank Charges Depreciation on Home Office Accountancy Fees Professional Indemnity Premiums A portion of Home Internet A portion of Telephone Staff Amenities Debt Collection Costs Income Protection Premiums Printing and Stationery Accountancy Fees Telephone and Internet Costs

26 FOR A BUSINESS: Income Be Aware of: TFN - Tax File Number ABN - Australian Business Number GST - Goods and Services Tax PAYGW - Pay As You Go Withholding PAYGI - Pay As You Go Instalment

27 Getting into Business Find an opportunity? Do the numbers? Is it viable? What is the purchase price? Can the cashflow from the business fund it? How do I structure the ownership? How do I structure the debt?

28 Getting into Business Find an opportunity? Rooms to Lease For Your Own Practice A Franchise to Buy An Existing Business to Buy Into An Existing Business to Buy A Partnership With a Colleague Remain an Employee or a Salaried Partner

29 Getting into Business Find an opportunity? Do the numbers? Are the numbers that you have correct!

30 Getting into Business Is it viable? Business For Sale!!! One Owner Low Kilometres Perfect Condition Sales $2,000,000 Net Profit $135,000

31 Getting into Business What is the purchase price? Net Profit divided by.225 =? So $135,000 /.225 = $600,000 Value and Price are rarely the same number

32 Getting into Business Can the cashflow from the business fund it? Clearly, the fewer days it takes your Customers pay you, the fewer days it takes you to sell your Stock and the longer it takes you to pay your Suppliers, while still protecting that relationship, the better your cashflow is going to be! Cash is King

33 Getting into Business FAMILY TRUST Partnership of Family Trusts Sole Trader How do I structure the ownership? Unit Trust Hybrid Trust Company Combination where Company runs the business and Trust owns the property and equipment Partnership

34 Getting into Business Interest and Principal vs Interest-Only Fixed Interest vs Variable Interest Short-Term debt vs Long-Term debt How do I structure the debt?

35 Tax

36 Goods Services Tax An Optometrist pays her Accountant $500$550 Optometrist outlays $550 but claims the $50 as a GST credit and this is refunded to her by the ATO $500 so she is out of pocket by Accountant receives $550 but reports the $50 GST to the ATO and sends it to them so he is ahead by $500

37 Goods Services Tax Mr Smith pays his Optometrist $900 $990 Mr Smith outlays $990 cannot claim the $90 as a GST credit cannot get a refund Optometrist receives $990 but reports the $90 GST to the ATO so he is out of pocket by $990 and sends it to them so she is ahead by $900

38 Debt and Investments

39 Be wise about good debt & bad debt Understand the bank tests for lending Know the types of loans Understand the process to buy Use leverage when borrowing to invest GET ADVICE